Iran's Petrochemical Industry During The Sanctions Era
The sanctions against the Iranian energy industry since the Iranian revolution not only reduced Iran's oil and gas production capacity but also made Iran unable to use its potential in the petrochemical industry. Due to sanctions, Iran could not play an important role in the petrochemical market.
The use of massive gas resources as cheap feedstock is one of Iran's best potential methods for producing low-cost petrochemical products. The use of huge Iranian gas resources and the conversion of these capacities to petrochemicals is an important alternative to prevent raw materials and cheap energy sources, although it is not easy to use all existing petrochemical capacities in the context of the recent U.S. sanctions against Iran.
Utilizing the potential of petrochemicals will allow Iran to increase its non-food exports and consequently increase its government currency resources. The value of this industry is estimated to be between $14 billion to $16 billion, which is expected to increase to $50 billion if the sixth plan is fully realized.
In the vision of Iran's 20-year development plan, the petrochemical industry should become the first-generation power sector in terms of the value of petrochemicals, and the production capacity of petrochemicals will reach $180 million by 2025.
Another important objective outlined in the outlook document is to replace the export of oil, gas and petrochemicals instead of exporting crude oil and natural gas, and supporting and strengthening the production chain. Given that according to law, the government is not allowed to invest in petrochemical projects, it must prepare the conditions for the more active participation of the private sector in this field.
Selling products as petrochemicals is another problem in the sanctions period, as foreign partners in petrochemicals will be struggling to work with Iran because they are afraid of U.S. sanctions against their companies, and, of course, production and sales in the petrochemical sector. It will be difficult to imagine the sale stage, if left behind, the import of currency to the country itself has problems, and with this, naturally, the money in petrochemical will remain in the accounts of foreigners. This money should be pumped into petrochemicals at the time of sanctions to cover current costs, such as purchasing feeds that are essential for production.
Studies show that, despite positive measures and significant achievements in the country's petrochemical industry, there are still weak points that need to be considered and addressed to achieve the desired goals of the documents and laws related to this industry. Policies and laws related to the petrochemical industry of the country emphasize the role of this industry in increasing the value of the oil and gas industry chain, counteracting the vulnerability of oil and gas exports, and the production and export of final petrochemical products.
According to forecasts, to reach the target at the end of the sixth program, the value chain of downstream industries and the production of high added value products in the petrochemical industry should be formed. But, as was expected, the new sanctions imposed by the new U.S. led to the industry's decline. Companies with high technology and modern technology, as well as with adequate financial resources, did not want to invest in Iran's petrochemical industry.
One of Iran's policies to find a bigger share in the world's petrochemicals market is diversification into the creation of products that will enable Iran to operate in multiple markets and have a more active presence. The development of petrochemical downstream industries will prevent the value chain from completing with crude oil.
After the Joint Comprehensive Plan of Action (JCPOA), Iran hoped to attract more than $100 billion of foreign capital to restore and increase its oil and gas production capacity as well as increase the capacity of producing petrochemicals. Given that some of the active units of the petrochemical industry of Iran are 40 years old and the renovation of these units was among the priorities of Iran, Iran failed to absorb the capital and technology needed to modernize these units. Iranian companies have good potential in the field of petrochemical, but the main problem is the use of rival companies such as the subsidiary of the tactics and foreign capital.
Sabic Saudi Arabia, the largest Middle Eastern petrochemical company and one of the five largest petrochemical companies in the world, also has the necessary support from the Saudi government, and with the
use of advanced technology from American companies active in Saudi petrochemicals, it has been able to keep its share in the regional and global market. While the company is deprived of huge gas resources such as Iran, the use of the latest technology from foreign companies and the newness of its petrochemical plant has made it possible for the country to sell petrochemicals at cheap prices.
During the last sanctions, petrochemical companies faced two major problems: First, exports of petrochemical products decreased significantly, and second, due to financial and banking sanctions and Iran's lack of use of the Swift system, petrochemical companies could not export their goods to Iran, and they needed to them to provide part of the export currency to the importers of goods. Today's petrochemical companies are facing a lot of problems, with feed and supply rates being one of the key and significant issues.
On the other hand, petrochemicals have not been able to capture the satisfaction of domestic customers – downstream industries. The price of gas feed in the past year was more than 300 percent. Additionally, the price of various types of services increased from 50 to 300 percent. As a result, the price of gas feed to petrochemical units in Iran is more expensive than all countries of the Persian Gulf. In petrochemicals in this area the main competitor is Iranian petrochemicals. Iran's petrochemical industry, due to its vast resources of energy and access to adequate and cheap fuel, has quick
access to global and regional markets, and there is potential for Iran's petrochemicals to be widespread among foreign investors.
In recent years, most petrochemicals have not been able to capture the satisfaction of the domestic customers, that is, downstream industries. These factors, along with the impact of sanctions, will make it hard to work for petrochemicals. With the high consumption of natural gas in Iran and the lack of attracting foreign capital in the Iranian oil and gas industry, Iran will not be able to achieve its goals of increasing the production of petrochemical products.
The withdrawal of Total and CNPC from Phase 11 of South Pars showed that as long as the sanctions are in place, large companies in the energy industry of Iran will not be able to function and Iran will have to use the capital and technology of domestic companies. But how Iranian companies with limited capital and technology can meet Iran's petrochemical needs is a question. The burnout of major petrochemical units is also an issue that should be addressed by the authorities of the Ministry of Petroleum. The dumping of Saudi petrochemical products in the petrochemical market is another problem for Iran's petrochemical industry.
In the opinion of the petrochemical industry, it is necessary to open new markets for Iranian products at any cost. Due to the high level of production of petrochemical products and its diversified and low prices, Iran can bring important markets around the world, provided it does not go to producers with domestic laws and regulations.
Exports to EU market
Iran exported $2.5 billion in petrochemical products to the EU market in the years prior to the last sanctions, but this became a problem with the start of sanctions and hence almost stopped. After the signing of the agreement, Iran's exports to European countries were resumed and, on the other hand, facilitating the import of needed technology and catalysts into the country in the event of bank transfers going on normally. Petrochemical experts say past concerns in the field of petrochemicals have now fallen sharply, and even if America puts Europe out of reach, we are not worried about the situation.
Analysts believe that in the past, all financial transactions between Iran and other countries had been difficult and practically disrupted the trading system of the country, and petrochemical companies were unable to export their products to the country due to these sanctions. At that time, exporting companies could not enter their currency and provide it to importers or use it to purchase the equipment they needed.
In general, it should be noted that sanctions on Iran's petrochemical industry included four main sectors: Sanctions on the export of products, sanctions on petrochemical products exports, technological sanctions and technical knowledge, and, finally, sanctions on the petrochemical industries. Of course, the United States has nothing to do with Iran in any of these areas, but the main concern is the sanctions imposed on European and Asian companies.